Accounts Receivable Financing- Bueno!

Mr. Elberg is a licensed attorney and licensed real estatebroker. Gregg Financial Services is a full service brokerage for commercialfinance companies and banks that fund B2B businesses. Mr. Elberg arrangesfunding from $25,000 to $50 million per month at competitive pricing, and worksto reduce your financing costs as your company grows. For more informationabout GFS, please visit our website: http://www.greggfinancialservices.com

Accounts Receivable Financing- Bueno explores theinternational world of exporting to Mexicofrom the U.S.and importing to the U.S.from Mexicowith the availability of commercial financing in the form accounts receivablefinancing.

According to Wordreference.com English to Spanishdictionary, the Spanish word “bueno” has about seven meanings: good, kind,well, nice, considerable as in a considerable amount of money, gorgeous andreal. As used in this article bueno is used to suggest that if you are in theimport or export business, Mexicois a good country to consider with special opportunities for U.S.traders and financing available in the form of accounts receivable financing.Your business can make a considerable amount of money in Mexico.

Mexicohas a population of over 103 million people. In January, 2007 U.S.exports to Mexicowere over $10.7 billion dollars and imports from Mexicoto the U.S.were over $15.3 billion dollars. Products traded included food, beverages,tobacco, lubricants, manufactured goods and machinery. Many U.S.companies have production and assembly operation in Mexicoto meet the challenges of global competition with Mexico’slower labor, utility and overhead costs. Compared to China,Mexico presentsless geographic logistical problems with our common border and relativeproximity. Mexicohas a highly skilled and hard working labor force. The Mexican legal system,however, is quite different from U.S.law where we have a Uniform Commercial Code which has been adopted by all ofthe U.S. States to regulate commercial finance transactions. Enforcingagreements in Mexicocan be problematic. Litigation can drag on for years and judgments aredifficult to enforce.

Mexicohas a highly evolved and organized legal system. It was originally based onGreek, Roman and French legal systems; today it more resembles a Latin Americancountry’s legal system than the U.S.legal system. Mexicohas vast layers of administrative law and a limited body of case law, or“jurisprudencia definida”. Mexican law now recognizes a variety of securitydevices which allows commercial finance lenders to offer accounts receivablefinancing with reasonable certainty. To participate in Mexico’smarketplace, it is wise to have a Mexican legal counsel as a part of your team.

One unique Mexican program is the Maquiladora concept andits privileged status. Maquila operations involve the importation of foreignmerchandise into Mexicoon a temporary basis, where it is assembled, manufactured or repaired and thenexported back to the U.S.or to other countries. The advantages of maquila operations are savings inoperational costs, waiver of import duties, opportunities to sell goods inMexico and other legal and tax advantages that are beyond the scope of thisarticle. Mexico’smaquila industry is a multi-billion dollar industry in the U.S.- Mexican border. These laws are business friendly and many small and mediumsized firms have increased their profit margins by manufacturing in U.S.-Mexicoborder cities.

One example is a fine furniture and wrought iron fabricatorbased in California that washaving financial difficulties because of high labor costs and increasingworker’s compensation premiums. These costs were cut in half by movingproduction to a maquiladora. Their exponential growth from 30 to 100 employeesmore than tripled their production and profits. Their sales contracts specifiednet 60-day credit terms but actual payments collections were closer to 90 days.Accounts receivable financing facilitated the company’s rapid growth byproviding liquidity from the purchase of the receivables by a commercialfinance company at a discounted rate. Without this cash flow, the company couldnot have taken advantage of their sales opportunities or produced theirproducts fast enough.

The Mexicofactoring financing process is similar to accounts receivable financing in the U.S.A finance company advances about 80% of the face value of the receivable tobusiness owner. This cash is used to pay for materials, labor and overhead.When the invoice is paid to the commercial finance company, their fees arededucted and the balance is returned to the business. In general, a 25% profiton the merchandise is necessary for the financing to make sense.

The bottom line: for U.S.importers and exporters Mexicooffers many opportunities for successful business operations. Accountsreceivable financing and maquiladoras may enhance their profits. Bueno!Business in Mexicois good.

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